The Rich Are Getting Richer; So Are the Poor. Jarrett Skorup

“No matter your thoughts about the Occupy Wall Street movement, the protesters are right in at least one respect: The rich are getting richer, and the poor are getting poorer.”

Variations on this statement have been repeated in dozens of blogs, commentaries and even news reports over the past several weeks. The claim comes via a Congressional Budget Office analysis showing that incomes for the top 1 percent of Americans grew by 275 percent between 1979 and 2007, while the lowest 20 percent saw their inflation-adjusted incomes grow by “only” 18 percent.

The numbers from the report are correct, but the assertions based on it are true only because of careful wording. While the “top 1 percent” had the highest growth of income, if broadened to include the top 20 percent (the usual way of analyzing such figures), the growth rate was a far less stratospheric 65 percent. This contrasts with about 40 percent growth for the middle three-fifths of all wage earners, and 18 percent for the lowest one-fifth.

Read full in Mackinac Center.

The Real "1 Percent". Michael D. Tanner

So just who are those top 1 percent of Americans that we're all supposed to hate?

If you listen to President Obama, the protesters at Occupy Wall Street, and much of the media, it's obvious. They're either "trust-fund babies" who inherited their money, or greedy bankers and hedge-fund managers. Certainly, they haven't worked especially hard for their money. While the recession has thrown millions of Americans out of work, they've been getting even richer. Worse, they don't even pay their fair share in taxes: Millionaires and billionaires are paying a lower tax rate than their secretaries.

In reality, each of these stereotypes is wrong.


Roughly 80 percent of millionaires in America are the first generation of their family to be rich. They didn't inherit their wealth; they earned it. How? According to a recent survey of the top 1 percent of American earners, slightly less than 14 percent were involved in banking or finance.

Roughly a third were entrepreneurs or managers of nonfinancial businesses. Nearly 16 percent were doctors or other medical professionals.

Lawyers made up slightly more than 8 percent, and engineers, scientists and computer professionals another 6.6 percent.

Sports and entertainment figures — the folks flying in on their private jets to express solidarity with Occupy Wall Street — composed almost 2 percent.

By and large, the wealthy have worked hard for their money. NYU sociologist Dalton Conley says that "higher-income folks work more hours than lower-wage earners do."

Because so much of their income is tied up in investments, the recession has hit the rich especially hard. Much attention has been paid recently to a Congressional Budget Office study that showed incomes for the top 1 percent rose far faster from 1980 until 2007 than for the rest of us. But the nonpartisan Tax Foundation has found that since 2007, there has been a 39 percent decline in the number of American millionaires.

Among the "super-rich," the decline has been even sharper: The number of Americans earning more than $10 million a year has fallen by 55 percent. In fact, while in 2008 the top 1 percent earned 20 percent of all income here, that figure has declined to just 16 percent. Inequality in America is declining.

As for not paying their fair share, the top 1 percent pay 36.7 percent of all federal income taxes. Because, as noted above, they earn just 16 percent of all income, that certainly seems like more than a fair share.


Read full in Cato Institute.

57.4 Percent of 1996′s Privileged 1% Are Now Among the Beleaguered 99%. Donald Boudreaux

For example, is Mr. Krugman warranted in dismissing the claim that “the rich are an ever-changing group” with a simple and parenthesized “not so”?  Who are the “rich”?  And how much income mobility is necessary for well-meaning observers to justifiably claim that “the rich are an ever-changing group”?

Is the following description, from the IRS, of data on individual households merely obfuscatory – something that no reasonable person can possibly interpret as evidence of substantial income mobility – or might it describe a plausible reason for well-meaning people to disagree with Mr. Krugman’s insistence that the rich are NOT an ever-changing group?: “More than half (57.4 percent = 100 – 42.6) of the top 1 percent of households in 1996 had dropped to a lower income group by 2005.  This statistic illustrates that the top income groups as measured by a single year of income (i.e., cross-sectional analysis) often include a large share of individuals or households whose income is only temporarily high.  Put differently, more than half of the households in the top 1 percent in 2005 were not there nine years earlier.  Thus, while the share of income of the top 1 percent is higher than in prior years, it is not a fixed group of households receiving this larger share of income.”

Read full in Cafe Hayek.

Are the poor getting poorer? Steven Horwitz

People often say that "the rich are getting richer while the poor are getting poorer." Economics professor Steve Horwitz explains why in the United States, this characterization is largely a myth.


Real income levels of the poorest 20 percent of Americans have actually risen over time. Further, the individual households that comprise the bottom income bracket do not stay the same. The majority of Americans in the poorest 20 percent become wealthier over the course of their lives. Want to learn more? Check out these resources:


• Op-ed on Inequality, by Prof. Horwitz: http://www.ajc.com/opinion/data-overlook-upward-mobility-816832.html


• Cox. W. Michael and Richard Alm. Myths of Rich and Poor: Why We're Better Off Than We Think, New York: Basic Books, 1999.


• Reynolds, Alan. "Has U.S. Income Inequality Really Increased?" Policy Analysis 856, Cato Institute, January 5, 2007. Available online at: http://www.cato.org/pubs/pas/pa586.pdf

The Wealth Inequality Argument. Mary Anastasia O'Grady

Tracking the same households over time shows significant income mobility. Mark Perry

Below are some of the main findings about the income mobility of American households over a short, six-year period from 2001 to 2007 based on the Minneapolis Fed study:

1. Looking across the first row of data in the table from left to right, we can see that for those U.S. households that were in the lowest earnings quintile (bottom 20 percent) in 2001, only 56 percent of those household remained in that same income quintile six years later in 2007, and almost half—44 percent—had moved up to one of the four higher income quintiles by 2007. Five percent of the lowest-income households in 2001 had moved up to one of the top two quintiles by 2007.

2. Looking across the fifth row of data from right to left reveals that of those households in the highest earnings quintile (top 20 percent) in 2001, only 66 percent remained there six years later and 34 percent had moved down to one of the four lower income quintile by 2007. Five percent of those highest-income households had moved all the way to the bottom income quintile in only six years.

3. For those households in the middle-income quintile in 2001, 42 percent remained in the same quintile in 20007, about one-third (32 percent) moved to a higher-income quintile, and slightly more than one-fourth (27 percent) moved to a lower-income quintile.

4. The bottom row in the chart shows that for households in the second, middle, and fourth income quintiles in 2001, more than half of each group moved to a different earnings quintile by 2007 (61 percent, 58 percent, and 55 percent, respectively).

Read full post in The American.